Reverse charge mechanism and form VAT 301

In a typical business, the supplier supplies goods and collects VAT on behalf of the customers, which is later paid to the government. Under reverse charge mechanism, the buyer or end customer pays the tax directly to the government.

The supplier does not have to pay VAT on import items, so the obligation of reporting a VAT transaction is shifted from the seller to the recipient. The recipient will have to record the VAT on purchases (input VAT) and the VAT on sales (output VAT) in their VAT return each quarter.

Source: xpertsleague.com

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